Iraq sees hefty return to oil growth in 2014

* Production in 2014 set to rise by at least 500,000 bpd

* Big gains from southern Majnoon, Garraf, Halfaya

* Output this year to average around 3 million bpd

By Peg Mackey

BAGHDAD, Oct 23 Iraq, OPEC's second biggest oil
producer, expects a robust return to growth next year as foreign
companies at work in its southern oilfields push output towards
the highest level ever, a senior Iraqi oil official said on
Wednesday.

Thamir Ghadhban, chairman of the advisory commission to
Iraq's Council of Ministers, said flows are set to rise by at
least 500,000 barrels per day (bpd) to an average 3.5 million
bpd - as Majnoon - run by Royal Dutch Shell, Garraf -
led by Malaysia's Petronas - and Halfaya, operated by PetroChina
, ramp up.

Farther north, the Badra oilfield, run by Russia's Gazprom
Neft, the oil arm of Gazprom, is also set to come on
line.

"We expect a significant rise in production next year," said
the senior oil technocrat.

"And if we have an increment of 500,000 barrels a day
sustained over 2014, with the same level of oil price (above
$100 a barrel) it will be positive compared with this year."

Production this year is likely to average more than 3
million bpd, a touch up on 2012, but by the end of the year
rates are likely to reach a level of 3.5 million bpd, said the
former oil minister.

After flatlining for decades due to wars and sanctions,
Iraq's output began to expand in 2010 after it secured service
contracts with oil titans such as BP, Shell, Eni
and Exxon Mobil.

Since then, output has risen by 600,000 bpd to 3 million bpd
courtesy of higher flows from the core oilfields of Rumaila-
operated by BP, West Qurna-1 - run by Exxon - and Zubair, where
Eni is leading development.

These vital southern oilfields, along with Majnoon and West
Qurna-2 - led by Russia's Lukoil - are the main drivers of
Baghdad's oil expansion.

The swift increases have helped cushion oil markets from
price swings after shipments from neighbour Iran were halved due
to Western sanctions and output from exporters such as Libya and
Sudan proved unstable.

But Iraq's production revival has slowed this year due to
infrastructure and security problems on top of an ongoing row
between Baghdad and autonomous Kurdistan, keeping output far
below projected targets.

The obstacles led Iraq to backtrack on an initial 2013
target of 3.7 million bpd, which - with projected growth of
700,000 bpd - unnerved regional rivals, including OPEC
heavyweight Saudi Arabia. The Kurdistan Regional Government
(KRG) was due to contribute 250,000 bpd.

"If you take all this together: losses in the south, losses
due to sabotage on the export pipeline, plus the KRG's
non-fulfillment of its obligation, you can see why the planned
production and export levels for 2013 were not reached," said
the Iraqi oil official.

Oil is at the heart of a dispute between the federal
government and Iraqi Kurdistan over control of oilfields,
territory and crude revenues.

Baghdad says it has the sole right to explore, develop and
market the country's oil with regional participation in
accordance with the constitution.

Sales of oil produced in Iraq's Kurdish region via the
federal pipeline system have been blocked in the dispute.

Kurdistan has since been making strides towards energy
independence and is due to start up its own pipeline via Turkey
by the end of the year, in defiance of Baghdad.

"The federal government is opposed to this. They have
declared it officially and they have conveyed their opposition
to the Turkish government officially," said the Iraqi oil
official.

Iraq has provided the world oil market with crucial
supplies, giving consumers another option besides Saudi Arabia
as the main alternative exporter.

Exports have been running at 2.4 million bpd this year, but
fell to 2 million bpd last month, the lowest in 19 months.
Repairs and expansion work at the strategic Basra Oil Terminal
cut shipments of Basra Light crude, which accounts for most of
Baghdad's export revenue.

"This is now over and exports are picking up," said
Ghadhban. When completed by mid-2014, the port expansion will
provide Iraq with offshore export capacity of 4 million bpd.

And if myriad infrastructure and political hurdles were to
be removed, Ghadhban said output next year could soar towards 4
million bpd - overtaking Iraq's all-time high of 3.8 million,
hit in 1979. But this is unlikely, said the Iraqi oil official.

"Four million would be a challenging target - a sustained
average over the year of 3.5 million would be more realistic,"
he said.

It would also provide ample oil revenue, which accounts for
the lion's share of Iraq's government revenues and foreign
exchange earnings.

Production of nearly 3 million bpd earned Baghdad $94
billion in 2012 and netted $61 billion in the first eight months
of this year.

"There is so much pressure on the government to provide more
revenue to improve the standard of living and for services -
especially in the energy and security sectors," said Ghadhban.

FRANKFURT/LONDON, Dec 9 The European Central
Bank hopes its decision to confront struggling Italian bank
Monte dei Paschi at last will draw a line under a multi-year
crisis that has risked tarnishing its reputation as a credible
supervisor.

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